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are unaware of, any other section providing such an exemption
under these facts. Regardless of how the amount received from IBM
is characterized, it cannot escape the broad provisions of
section 61.
Respondent also determined that petitioners are liable for
an accuracy-related penalty under section 6662(a) for a
substantial underpayment of tax. Section 6662(a) imposes a
penalty in an amount equal to 20 percent of the portion of an
underpayment to which that section applies. Section 6662(b)(2)
provides that the penalty shall apply to any substantial
underpayment due in tax.2 There is a substantial underpayment
if the amount of the underpayment exceeds the greater of 10
percent of the tax required to be shown on the return or $5,000.
Sec. 6662(d)(1)(A). If, however, the taxpayer discloses the
relevant facts on the return and there is a reasonable basis for
the position, the penalty does not apply. Sec.
6662(d)(2)(B)(ii). Petitioners attached Form 8275, Disclosure
Statement, and a copy of the Release to their return. Those
documents reflect the facts of the payment. In deciding whether
there was a reasonable basis for petitioners' position, we bear
in mind that petitioners' return was filed before the Supreme
2 Respondent's trial memorandum argues that the sec. 6662(a)
penalty was attributable to negligence. The notice of deficiency
refers to an underpayment penalty. Even if we were to consider
the issue of negligence, our conclusion would be the same for the
reasons subsequently stated herein.
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